How to get your personal loan approved
There’s no magic formula or trick to getting your personal loan application approved but there are some practical measures you can take to increase the chances of success.
We all know that lenders look at your income, your financial stability and assets, as well as at your credit score, when they consider your application. These factors, however, are only the tip of the iceberg; there’s much more going on behind the scenes when you submit your application. It’s these hidden factors and tips that you should know more about so that when you apply for your personal loan fast approval is that little bit more likely.
Find out more about the hidden factors by reading these six insider tips before you head to a comparison site to look for and apply for your ideal personal loan.
1) The comparison rate is more important than the interest rate
The interest rates on the loans you’re looking at are only one part of the equation; they don’t give you the full picture of what you’ll end up paying by the time you’re done. That said, you need to see if the interest rate is fixed or variable over the term of the loan as this can also affect your eventual spending.
You need to examine the comparison rate of the loans to get a clearer idea of the total costs, including fees. You should also factor in extra costs like early repayment fees and late payment fees (we all try to avoid paying late, but it can happen to the best of us). There are also set-up fees with some loans, but they’re becoming rare these days.
Early repayment fees are usually around two to three months’ worth of interest; if you think you might pay your loan off early, then look for a deal without this fee.
The point of looking at these fees is that they’re factored into the calculations that the lender makes and if they tip you over the edge of affordability, you may have your application rejected. This is why you should spend some time with a loan calculator to work out the best amount—and repayment period—to apply for.
2) Have a frank look at yourself
Get your paperwork, like tax, completed. Do you look like a good borrower? Lenders can’t decide to accept or reject a loan application based on age, profession, sexual orientation or postcode alone as this would be discriminatory. Factors like income, steadiness of employment and age can play a part, though, as they can have an impact on your ability to service the loan.
Your lender wants its money—and the interest—back as soon as possible because that’s the business it’s in. If its algorithms and statistics say that a particular age or professional group is more prone to late or missed payments than others, then the lender might decline the application. At the very least it may impose a higher interest rate or a set-up fee.
If you know you’re in one of these age groups—very young or post-retirement, for example— then you could improve your chances by showing how you have a good score or how you’re in steady employment.
3) Find out what your credit score and credit history look like
Your score and your history aren’t quite the same thing. They both need to be pretty decent, though, as lenders look at both.
Your credit score is a number-based rating that lenders can use to assess your financial strength and stability. There are several Australian credit reference agencies (CRA) that you can obtain your credit score from and it’s an important step to take if you don’t have much of an idea about it already. Each CRA uses a different scoring system, but they’re all numerical and the higher the score, the better your rating is.
Then there’s your credit history, which details things like the running of your existing open credit accounts, applications for credit, missed or late payments, bankruptcies and so on. It’s important for you to know what’s on here, too, because there may be something on there in error. If you spot something there that shouldn’t be, you can ask the CRAs to change or delete it. They can’t remove anything that’s correct and factual, however.
If you know that your rating and history aren’t as good as they could be, then you can take steps to improve them, as well as aim your loan applications to lenders that specialise in poor credit loans.
4) Make sure you have a good purpose for the loan
You’ll have to specify your reasons for wanting the loan. “Good” reasons are to pay for things like driving lessons, vocational courses, home improvements and so on. Many lenders won’t lend you money to make financial investments, especially in cryptocurrencies.
5) Don’t take on too much credit
Remember, lenders want you to pay them back. If you already have a number of loans, you’re less likely to be approved, even if you’re managing your existing credit well. You could consolidate your existing loans first, or even pay one or two of the smaller ones off if you’re aiming for a big new loan.
6) Remember you may be assessed by a computer
You may well be weeded out by an algorithm before you even get to a human! Online lenders in particular use computers to assess applicants as it helps them to offer their rapid approval service. These algorithms sort out the strong applications so they can move them to the next stage sooner. If you know you’re likely to be seen by a robot first, then make sure you fit all the criteria before you apply so you don’t waste time and rack up several failed applications that leave a muddy footprint on your record.
One last word of caution
Even if you know all about these industry tips, you still need to find the right providers before you apply. This is why you need to compare your loan options and do your own weeding out process to increase your chances of approval.
Compare personal loans from all of Australia’s major banks and significant lenders here.